Gyroscopic Investing

I was married once... when I believed in love. The divorce was very easy and took all of about 10 minutes at the county courthouse. We didn't have children, but did own a home together (which we sold and divided the proceeds).

I think we got married because it's the social norm. She certainly wasn't interested in the commitment, as it turns out.

I don't feel like it was a benefit or hinderance for us. It would have proved useful in a number of situations that never ended up arising (hospital rights, death rights, etc.)

So here's my analysis that in many situations, state-marriage is a poor cost/benefit decision. I'll split this up into two broad categories... Taxes and Risk/Legal planning.

1) Taxes

First, I'd encourage people to play around on this site:

http://calc.taxpolicycenter.org/marriag ... e-iframe-0

This helps show folks filing Single/Single or Single/HoH vs filing Married Filing Joint. The one caveat I'll give is that if one spouse doesn't work, you usually win filing MFJ, but there are a lot of situations where filing S/S (Single/Single) or S/H (Single/Head-of-Household) comes in far-less expensive. Mostly because of the following affects:

1) When you file jointly, the income-ranges at higher brackets don't double. So two higher-earning spouses lose a lot

2) Similarly, credits often don't double from HoH to MFJ. Or even Single-to-MFJ.

3) You can stack deductions onto one or the other spouse to a pretty significant degree, allowing one spouse to take the Standard Deduction while the other itemizes.

4) Social Security taxation & Obamacare credits both phase in/out at a sharper rate for couples than two individuals.

5) In my state, similar affects are felt at the state income tax and property tax refund level. I won't go into these as they're unique to MN.

So here are a few examples using the linked-to website:

$40k+$40k. No kids. Standard Deduction:
- No difference

$40k+$20k. 2 kids. Std. Ded.:
- Marriage LOSES by $1,628.

$30k+20k. 2 kids. Std. Ded.:
- Marriage LOSES by $3,457.

$100k+40k. 2 kids. Std Ded:
- Marriage LOSES by $1,674

$100k+40k. 2 kids. Various itemized stacked on higher earner.
- Marriage LOSES by $2,499

$200k+$100k. 2 Kids. Std Ded.:
- Marriage LOSES by $5,242.

$400k+$400k. 2 kids. Std Ded.
- Marriage LOSES by $35,563

$20k+$20k in SS Income. $20k + $20k in IRA Distributions:
- Marriage LOSES by $2,190

There are other small items that are worth mentioning:

- AMT exemption phase out is at higher-than-half filing SIngle/HoH vs MFJ.
- $6,000 in joint Capital Loss deduction instead of $3,000.
- Passive loss phase-out at the same income for Single vs MFJ.
- "Related Party" transactions become not related-party when you're not married.
- Like I said, if one spouse is no-income or very-low income, that is almost the only scenario where they receive a material benefit for being married.
- My state of MN has similar tax-bracket and phase-out issues. Exacerbating the costs of state marriage.

Someone might bring up that the spousal exemption with regards to the estate tax is a pretty big tool. I would agree, but 1) you have to have a sizable estate for that to be an issue, and 2) you can always get married when you have that estate. If you see how much you lose in income-tax above, you might see what someone will have to pay in income tax for that "protection" at high incomes. It's a lot if you have two high-earning spouses.


2) Risk-management & Legal Benefits:

A big reason people mention it's safer to be married is in the realm of risk-management. First off, I'd like to instill the premise here that I "believe" in full risk insurance coverage, which means basically as much convertible-term-life and long-term disability coverage as one can get. I also believe in rich savings habits. I believe in these things no matter whether you have a state marriage contract or not because anything less is a financially insecure scenario otherwise.

Similarly, having proper legal-documents in-place is always a best-practice for financial security. Simply relying on marriage contract and the probate system to help you is a bad idea.

That said, there are some scenarios that could fall under "risk management" that you do get some benefit for being "married."

a) Unpaid Family Leave during a sickness
- In-spite of the "feel" of this, it's really not much of a benefit. It's short-term and un-paid. You're FAR better off just getting really good disability & life insurance protection.
b) Visitation rights
- Can be achieved with a medical directive & PoA (which you should have anyway) from what I've read.

http://family.findlaw.com/living-togeth ... er-of.html

c) Possibly other employment benefits (the military being one example) that are very beneficial to married spouses but ineligible to unmarried spouses.
- Even many of these are exaggerated as they cost money... oftentimes more than what it would cost the spouse to get individually.

There are a few areas, though, that seem to benefit from not being married:

- Medicaid planning - Only so much of one's estate is protected for the purposes of Medicaid planning. Having a fire-wall between the assets of a couple is a very good idea if you trust the other person to take care of you. If you don't trust them to take care of you, you probably shouldn't be marrying them and probably would be pretty screwed anyway.

https://www.elderlawanswers.com/medicai ... ules-12016

- Bankruptcy - I'm still working on this one, but I'm pretty sure it would be better to have a firewall between one-person's assets and the other's potential debt/assets if something crazy were to happen. Lawsuit. Business failing. Etc.

I'm pretty sure I'm forgetting some things, but this is the meat of it so far.

I'm coming to the conclusion that we as a society have lazily accepted the "benefits" that we publish about marriage contracts along with unnecessarily combining them with the religious and social aspects of marriage, which can be done without the state contract (can still have a ceremony and reception, change your name, wear a ring, have kids, etc, etc.)

Notice that I didn't have to go into any sort of Mens Rights Activist rant about how women are screwing us in divorce or in marriage and sucking us dry. I find that stuff to be childish. It's obvious to me that even without all that mumbo-jumbo, if you simply get properly insured and get the right legal documents (which you probably want anyway), you are probably better off doing your tax, risk, legal and financial planning without a state marriage contract, with the big exception probably being if one spouse stays home or barely works.

One other piece is that not only can the government change the contract at any time, but you can get state-married on a whim in the future if it benefits you enough at that time to be worth it. And look at the COST. If someone set up an attorney's office and set up these form "marriage" contracts and the expense was $200 per month for the rest of your life for the random, limited benefits that could much-better and more-easily be secured by proper legal/insurance planning, they wouldn't get so much as one piece of business.

I'm more convinced than ever state-marriage is more of a tool for government to organize society and justify its existence than it is for people to protect themselves. It's an absolutely terrible cost/benefit arrangement compared to DIY'ing your protection and organizing your life through the planning I mentioned. For $1,000 one-time you can get a pretty killer estate-planning package from an attorney. For about $200 per month a young couple can get a killer life & disability insurance ensemble. Those things you would have benefited hugely from doing right ANYWAY, so I don't even see those as additional costs so much as a good reason not to rely on the state for their shitty, expensive, and arguably dangerous "protection."

I thought that if one spouse itemizes income-tax deductions, that the other spouse also has to itemize and is not allowed to take the standard deduction. Is that not true?

stuper1 wrote:I thought that if one spouse itemizes income-tax deductions, that the other spouse also has to itemize and is not allowed to take the standard deduction. Is that not true?

Only if you are married filing separate.

Which is quite often a terrible way of filing. Worst of all worlds.

Remember according to "law" they aren't a "spouse."

Well done Moda,

A very concise summation of the legal/financial side of a Marriage.

Couple of queries:

1. Pugchief suggested a "pre-nup". Upon dissolution of a relationship, does this have any legal standing? If the partners agreed previously, upon the dissolution of a relationship, can the state void/alter the prenup terms?

2. Even though you make a compelling case of a non-state marriage, if the state decides you are "defacto married" after two years co-habitation (as in Australia), doesn't this have the same effect as having a state marriage in the first place?

As I write this, I note that the theme is about state interference in private contracts !

Thanks for a thought provoking topic

MangoMan wrote:Great analysis of the finances, Moda.

And you can [and should] do a "pre-nup" even on a conceptual marriage.

I don't think you can do a prenup without the nup.

But I think one could definitely have a deep discussion on how to best allocate wealth acquired as a couple is always going to be a dilemma, and if she has a kid you're on the hook for support no matter what.

As for me, we split almost all bill-expenses 50/50 and work accumulate the left-overs into our own individual accounts. We both know if things don't work out we are on our own. We own some assets together but we don't own much. We rent and are quasi-minimalists.

I'm kicking the tires on some legal professionals in the area and already have a great insurance guy. We will see how it all goes.

Hal wrote:Well done Moda,

A very concise summation of the legal/financial side of a Marriage.

Couple of queries:

1. Pugchief suggested a "pre-nup". Upon dissolution of a relationship, does this have any legal standing? If the partners agreed previously, upon the dissolution of a relationship, can the state void/alter the prenup terms?

2. Even though you make a compelling case of a non-state marriage, if the state decides you are "defacto married" after two years co-habitation (as in Australia), doesn't this have the same effect as having a state marriage in the first place?

As I write this, I note that the theme is about state interference in private contracts !

Thanks for a thought provoking topic

Your first point is noted. I'm not sure what kind of agreements/terms you'd want to organize. To me it seems like this is a whole new rabbit hole if it's even enforceable.

2) forgot to hit on that. In MN there is never that de factor married state. Your results might vary in various states. IMO it's a pretty nasty affront to the rights of a couple to impose that status on them if they've done their own planning. Luckily my state doesn't do that.

What would be the most important terms to knock out in a prenup w/o a marriage contract? Or partnership agreement or whatever?

I mean I think I know... but I'm sick of thinking I know things about all this. Cuz I've had my preconceptions rocked the last 18 months or so.

moda0306 wrote:So here's my analysis that in many situations, state-marriage is a poor cost/benefit decision. I'll split this up into two broad categories... Taxes and Risk/Legal planning.

1) Taxes

So here are a few examples using the linked-to website:

$40k+$40k. No kids. Standard Deduction:
- No difference

All salary income:
$40k married vs. $40k single: married = 1671, single = 3742, so married wins by almost $2k
$50k married vs. $50k single: married = 3074, single = 5253, so married wins by over $2k
$100k married vs. $100k single: married = 10654, single = 17753, so married wins by over $7k
$150k married vs. $150k single: married = 23154, single = 31638, so married wins by over $8k

Note that these are all for two spouses over 65, but I don't think the relative numbers would change much. I can run it again for under-65 spouses if anyone cares.

Libertarian666 wrote:

moda0306 wrote:So here's my analysis that in many situations, state-marriage is a poor cost/benefit decision. I'll split this up into two broad categories... Taxes and Risk/Legal planning.

1) Taxes

So here are a few examples using the linked-to website:

$40k+$40k. No kids. Standard Deduction:
- No difference

All salary income:
$40k married vs. $40k single: married = 1671, single = 3742, so married wins by almost $2k
$50k married vs. $50k single: married = 3074, single = 5253, so married wins by over $2k
$100k married vs. $100k single: married = 10654, single = 17753, so married wins by over $7k
$150k married vs. $150k single: married = 23154, single = 31638, so married wins by over $8k

Note that these are all for two spouses over 65, but I don't think the relative numbers would change much. I can run it again for under-65 spouses if anyone cares.

How are you splitting the income? Of course, if you put it all to one spouse, as I mentioned with my caveat that if one spouse is low/no income, it works in that couple's favor to be married.

moda0306 wrote:

Libertarian666 wrote:

moda0306 wrote:So here's my analysis that in many situations, state-marriage is a poor cost/benefit decision. I'll split this up into two broad categories... Taxes and Risk/Legal planning.

1) Taxes

So here are a few examples using the linked-to website:

$40k+$40k. No kids. Standard Deduction:
- No difference

All salary income:
$40k married vs. $40k single: married = 1671, single = 3742, so married wins by almost $2k
$50k married vs. $50k single: married = 3074, single = 5253, so married wins by over $2k
$100k married vs. $100k single: married = 10654, single = 17753, so married wins by over $7k
$150k married vs. $150k single: married = 23154, single = 31638, so married wins by over $8k

Note that these are all for two spouses over 65, but I don't think the relative numbers would change much. I can run it again for under-65 spouses if anyone cares.

How are you splitting the income? Of course, if you put it all to one spouse, as I mentioned with my caveat that if one spouse is low/no income, it works in that couple's favor to be married.

I'm not splitting it. There is one working spouse and one stay-at-home spouse.

BTW, this is my situation.

Also I should point out the benefits of being married when collecting Social Security benefits.

To take an oversimplified example, suppose that one spouse has a benefit of $2500/month and the other has a benefit of $1000/month on their own records.

In this case, there are two ways that this is better than two unmarried people living together.

First, the spouse with the lesser benefit gets topped up to 1/2 of their spouse's benefit, so this would mean $3750 rather than $3500 a month for the two of them.

And what can be much more important, when the first spouse dies, the other spouse gets the greater of the two benefits. So in this case, if the man is the one with the higher benefit, and he dies first, his widow gets $2500 rather than $1000. Of course, an unmarried partner is not entitled to this widow's benefit. This can make the difference between penury and a reasonable standard of living.

Of course Social Security is much more complex than this scenario suggests, but it is representative of the benefits of being married.

Yeah if there is a non-income earning spouse it really changes the numbers.

Social security planning is one other one where there might be decent benefits to being married. Esp if you have large differences in benefits.

That said if the former doesn't apply to you (as it wouldn't for many people, costing them thousand of dollars per year), waiting until you are 62 or so to get married is always an option.

It's always easy to get married if the situation calls for it. Not easy to go the other way.

moda0306 wrote:Yeah if there is a non-income earning spouse it really changes the numbers.

Social security planning is one other one where there might be decent benefits to being married. Esp if you have large differences in benefits.

That said if the former doesn't apply to you (as it wouldn't for many people, costing them thousand of dollars per year), waiting until you are 62 or so to get married is always an option.

It's always easy to get married if the situation calls for it. Not easy to go the other way.

Yes, all you have to do is to make sure to get married at least 9 months before you die.

Which should be easy... as long as you know when you are going to die!

Interestingly enough, unmarried people who have similar SS benefits need life insurance to protect the potential loss of the second benefit just as much as married people do.

Have I mentioned my retirement analyzer, which among other things figures out how much that is?

Curious, if any of you are married and had a prenup, how did that whole conversation go? I'm glad my husband and I didn't get a prenup. Sorry but it's just so plain unromantic.

MangoMan wrote:

Michellebell wrote:Curious, if any of you are married and had a prenup, how did that whole conversation go? I'm glad my husband and I didn't get a prenup. Sorry but it's just so plain unromantic.

Since a state marriage is a legally binding contract, romance has nothing to do with it. You shouldn't let emotions get in the way of making level-headed business decisions, which is essentially what a state marriage is. Unfortunately, most people don't realize this when they enter into it.

Well for me, if I don't trust someone to keep their marriage vows, I would not want to get married regardless and then rely on a prenup if it all falls to pieces. I would see that as similar to boarding a "suspect" aircraft and then hoping the parachute works if something goes wrong. Better not to board in the first place.

If you do want to take that chance, then I feel following Pugchiefs advice is essential.

Also, with every successful and happy marriage I know of, they knew each other for years prior to romantic interest, so they had an insight into each others character before hand. How that would happen in a large city instead of a small country town, I would have no idea....

PS: If someone asked me to sign a prenup, its almost like saying "I don't completely trust you to keep your wedding vows, so sign this contract."

MangoMan wrote:

Hal wrote:

MangoMan wrote: Since a state marriage is a legally binding contract, romance has nothing to do with it. You shouldn't let emotions get in the way of making level-headed business decisions, which is essentially what a state marriage is. Unfortunately, most people don't realize this when they enter into it.

Well for me, if I don't trust someone to keep their marriage vows, I would not want to get married regardless and then rely on a prenup if it all falls to pieces. I would see that as similar to boarding a "suspect" aircraft and then hoping the parachute works if something goes wrong. Better not to board in the first place.

If you do want to take that chance, then I feel following Pugchiefs advice is essential.

Also, with every successful and happy marriage I know of, they knew each other for years prior to romantic interest, so they had an insight into each others character before hand. How that would happen in a large city instead of a small country town, I would have no idea....

PS: If someone asked me to sign a prenup, its almost like saying "I don't completely trust you to keep your wedding vows, so sign this contract."

Hal and Michelle,
If you were going to partner up with someone in a business venture, let's say a restaurant or a dry cleaning store, would you do so with out a written contract? Even if you knew your business partner for years? But knowing how many businesses fail in the first 7 years? You think you know people...until you don't.

Would you refuse to go into business with them if they asked you to sign a contract before forking over half the seed money?

Short answer: Now, in a large city, "No" I would not carry out business transactions without a contract.

Long answer: Coming from a small town, yes people did carry out business transactions with just a handshake. I still know small communities where this happens, BUT, societal and religious pressure keeps people behaving honestly. Also in a small town, there is more interdependence - Eg. Who will harvest your crop if you get sick, and you have destroyed your reputation by defrauding someone?

Have a read of this article as an insight into living in small communities, especially note this quote"

“Allowing our members to shift their interdependence on each other to dependence upon any outside source would inevitably lead to the breakup of our order.”

https://www.armstrongeconomics.com/worl ... ity-taxes/

These factors also led (in the past at least) to a much higher chance of a successful marriage. But now, the Government has forcefully inserted itself into marriage, so the interdependence is gone. A spouse can behave unethically, but still have security because of court orders imposed on the other party. Consequences for your actions are gone now.

Hope this explains my thoughts Pugchief, and look forward to hearing Michelle's and others opinions.

MangoMan wrote:

Hal wrote:

MangoMan wrote: Since a state marriage is a legally binding contract, romance has nothing to do with it. You shouldn't let emotions get in the way of making level-headed business decisions, which is essentially what a state marriage is. Unfortunately, most people don't realize this when they enter into it.

Well for me, if I don't trust someone to keep their marriage vows, I would not want to get married regardless and then rely on a prenup if it all falls to pieces. I would see that as similar to boarding a "suspect" aircraft and then hoping the parachute works if something goes wrong. Better not to board in the first place.

If you do want to take that chance, then I feel following Pugchiefs advice is essential.

Also, with every successful and happy marriage I know of, they knew each other for years prior to romantic interest, so they had an insight into each others character before hand. How that would happen in a large city instead of a small country town, I would have no idea....

PS: If someone asked me to sign a prenup, its almost like saying "I don't completely trust you to keep your wedding vows, so sign this contract."

Hal and Michelle,
If you were going to partner up with someone in a business venture, let's say a restaurant or a dry cleaning store, would you do so with out a written contract? Even if you knew your business partner for years? But knowing how many businesses fail in the first 7 years? You think you know people...until you don't.

Would you refuse to go into business with them if they asked you to sign a contract before forking over half the seed money?

Would I agree to one of those business ventures? No. That is not sane or rational.

For me, love is also not sane or rational. When my husband married me, I was entering a win-win situation (he had more money than me and also makes more money than me), but he was taking a risk with me. I'm still glad he took it, and to be honest, if my son finds himeself in that situation, I'd recommend he take that leap. I also just had my fourth child. That's not the slightest bit rational from a monetary or logical standpoint. There are already plenty of people on this planet and we'd be so much more rich if we had fewer children. We'd also be less tired and have more time to spend with our oldest children. But of course I'm thrilled and beyond blessed to have all the children that I have. I generally like to think of myself as a thoughtful and logical thinker, but when it comes to areas of the deepest love like marriage or children, that all goes out the window.

Logically, it makes so much more sense for people to just live together but I really don't want to see marriage become obsolete because I think it is rewarding to the married people. My father got burned pretty badly in the divorce with my mother, but of course I have to be glad that he married her or else I wouldn't be here now. My father is also very happily remarried now too. I remember being really surprised because even after all my father had been through with my mom, he married my stepmother only 6 months after they met and he paid up all her debt (something like $30K in credit card debt that he paid all at once). They went on to have three more children and she ended up becoming really responsible with her money, as well as a very good wife and mother.

I don't know if the type of woman that seeks to get married is, in general, superior to the type of woman who is content to just date and not commit. Of course I'm biased, but I think that the marrying type of man and woman both are probably more stable and devoted than the types who are not seeking that level of commitment. So in that sense, it IS more sane to get married because the highest-ranking women or men are the ones who are looking for that. If you are determined not to commit to legal marriage, you may be left with the less desirable people to choose from.

Nowadays with fewer and fewer people marrying, maybe that's not the case as much as it used to be. But I still think there may be something to that and truthfully I'd like to see more people value marriage like they used to in this country.